Last April, we reported that the Competition Tribunal had dismissed an application by the Commissioner of Competition for an order under section 100 of the Competition Act to prevent the closing of Labatt’s acquisition of Lakeport Brewing – see M&A Bulletin, April 9, 2007, Labatt–Lakeport Transaction: Implications of the Competition Tribunal’s Dismissal of the Commissioner’s Application to Prevent the Merger Closing. On January 22, 2008, the Federal Court of Appeal dismissed the Commissioner’s appeal of the Tribunal’s decision. In doing so, the Court confirmed that the granting of section 100 orders is discretionary and it agreed with the Tribunal that the Commissioner’s application in this case had failed to meet the statutory requirements for an order.
Predictions have been made by some competition specialists that these decisions will prompt merger parties to push back more aggressively against lengthy reviews by the Competition Bureau. We disagree.
The premerger notification provisions of the Competition Act establish a maximum statutory waiting period of 42 days that must expire before the parties to a notifiable merger may complete the deal. In the vast majority of cases – more than 90% of all mergers in any given year – the Bureau completes its review within a much shorter period of time, often as little as two weeks. In most of the remaining cases, the Bureau completes its review within the statutory waiting period or shortly thereafter. When the Bureau’s review exceeds the formal timeline, the parties to the transaction are often willing to give the Bureau the extra time it requires. They do so because the corporate timeline to complete most mergers is usually longer – sometimes much longer – than 42 days, and most purchasers want the certainty that comes with the completion of the Bureau’s review and its decision not to challenge the transaction.
As regards the few “very complex” mergers in Canada each year (in 2007, there were only three, including Labatt) for which the Bureau’s reviews can take up to five months or more, the Labatt decisions may place some pressure on the Bureau to expedite its review, particularly if the parties threaten to close the transaction as soon as the statutory waiting period has expired. However, this will only be an effective strategy if (i) the purchaser is prepared to take the post-closing risk of a challenge by the Bureau, which has three years after a merger is completed to commence remedial proceedings, and (ii) the parties believe that the Bureau will be unable to establish its entitlement to a section 100 order on the facts of the particular case.
We continue to believe that the Commissioner will seek an amendment to the Competition Act to either ease her burden in establishing entitlement to a section 100 order or provide her with a longer period of time in which to review the most complex merger transactions.